Homeowner Construction Lien Recovery Fund - General Information

The Michigan Homeowner Construction Lien Recovery Fund (Fund) was created under Section 2 of Public Act 497 of 1980, as amended, to provide protection when the homeowner, has in good faith, paid their licensed contractor for materials and labor and the contractor failed to compensate materialsmen, subcontractors, and/or laborers.

The Program is funded through membership fee assessments on each new residential builder and maintenance and alteration contractor, electrical contractor, mechanical contractor, and plumbing contractor licensed by the State of Michigan. Membership is also available to subcontractors and suppliers who provide materials and labor to licensed contractors.  Beginning January 3, 2007, each licensed contractor is required to pay a $10 fee with their initial licensing application and a $10 per year fee during renewals for each license that is issued. Subcontractors will pay a $50 fee to become a member prior to work and a $30 membership renewal fee on June 1^st every 3 years. Suppliers are required to pay a $50 fee initially prior to their contract to supply materials or equipment and a $30 membership renewal fee on June 1^st every 3 years.If the supplier conducts business more than one retail location, each retail location must pay seperate fees for Fund memebership they wish to have coverage by the Fund.

The Fund was created to protect both the homeowners who have contracted with a licensed builder or remodeler for construction or improvements on a home, and the subcontractors, suppliers and laborers who have provided materials or labor on the job. The Fund does not protect from losses on apartment buildings, "spec" homes or commercial construction.

In the past, if a homeowner had completely paid the contractor for the work done, but the subcontractors, suppliers or laborers were not paid for materials or labor they had furnished, the loss was often borne by the homeowner who had to pay twice to protect his or her property from a lien. Now, under the Construction Lien Act, unpaid subcontractors, suppliers or laborers may present their claims to the Fund. Every licensed residential builder, electrical contractor, plumbing contractor and mechanical contractor is required to contribute into the Fund. Provisions in the law also allow subcontractors, suppliers and laborers to join and participate in the benefits of the Fund.